We do not know what the near-term will bring, but we think that the equity markets have already discounted a significant amount of the Fed’s pain, given the substantial losses suffered this year, suggests John Buckingham, value oriented money manager and editor of The Prudent Speculator.

Even if a recession hits, we continue to take comfort in the reasonable valuation metrics and generous dividend yields of our broadly diversified portfolios of what we believe to be undervalued stocks.

History is a guide and never the gospel, but we cannot forget that equities have 9% to 13% per annum returns over the past 90+ years. There have been many scary sell-offs along the way, but stocks have always overcome more difficult environments than what we are presently facing.

Greenbrier Companies (GBX) is predominately a manufacturer of railcars, even as its servicing division has grown and the firm has moved further into leasing over the past year. One of a number of cyclical companies whose stocks have been pummeled on recession fears, GBX trades at a 52-week low, down 45% year-to-date and 50% below its high from March.

The company receives little coverage from the analyst community, but 2023 is expected to be a robust year as metal prices recede and Greenbrier works through its backlog to improve volumes. Europe remains a wild card given the war in Ukraine, but raging petrol costs ought to support rail transport over truck.

The balance sheet carries a bit more debt than in the past, but we find it bearable as the average maturity is four years out with an average coupon of just 2.9%. Shares trade for less than 10 times the drastically reduced 2023 EPS projection and offer a very generous 4.4% dividend yield.

Headquartered in France, Total (TTE) is an integrated oil and gas company that has been vocal about its intentions to incorporate renewable energies into its mix.

Nevertheless, Total’s legacy fossil fuels business remains its greatest driver, recently delivering some of the strongest quarters the firm has seen in years. It also appears well-positioned to benefit from elevated gas demand in Europe as the Continent is pinched to replace its primary source of fuel.

Shares remain attractive as they continue to lag U.S. peers even as the company has embraced a focus on capital returns, incorporating the ever-popular base-plus-variable dividend payout.

Displaying the commitment to its greener vision, it plans to spin off its exposure to the Canadian oil sands in 2023 and intends to spend between $14 billion to $18 billion per year on natural gas expansion and carbon reduction projects. TTE trades for a single-digit P/E ratio while the dividend yield is 4.9%.

One of North America’s paper giants, Westrock (WRK) produces packaging for food, hardware, apparel and other consumer goods. The company’s lineup includes recycled and bleached paperboard, containerboard, consumer and corrugated packaging, and point-of-purchase displays.

Westrock has fiber-based packaging solutions in 30 countries and is targeting EBITDA (earnings before interest, taxes, depreciation and amortization) margin growth of around 19% by 2025, propelled by process optimization, innovation, efficiency gains and improved capital allocation decisions.

After slashing its dividend during the early part of the pandemic, a rebound in sales has allowed WRK to resume more generous payments, with the current yield at 3.2%.

While an economic slowdown in many parts of the world might be a near-term wet blanket on aggregate demand, we think WRK produces important products that aren’t easily replaced. The stock is very inexpensive, trading for a forward P/E ratio of less than 6.

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